Trade in the new landscape

12/09/17

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Alan Martin | NI Indirect Tax Lead

The UK Government has published two papers on its vision for how a new border with the EU and a specific paper on how the border between Northern Ireland (NI) and the Republic of Ireland (RoI) could be made as seamless and frictionless as possible.

And with good reason. A June 2017 Assembly briefing paper put the value of NI exports at around £7.8bn, of which 31% (£2.4bn) is destined for RoI and that alone represents about 56% of all NI exports to the EU. Given that and the 35,000 people crossing the 500 km border every day, it’s almost unthinkable to consider reverting to the glacial and bureaucratic border controls of three decades ago.

Under the provisions of the Common Travel Area (CTA), which predates both Irish and UK membership of the EU, there is free movement for CTA nationals. Whilst this includes free movement of people across the NI/RoI border, these regulations do not extend to goods.

It is widely acknowledged that in a post-Brexit world any form of hard border should be avoided and the UK Government is seeking to enable individuals travelling across the NI/RoI border to continue to be able to move personal goods or goods for their own consumption freely. However, given the multi-jurisdictional supply chain model - and the all island of Ireland model - adopted by many NI businesses, there are understandable concerns in both jurisdictions as to how the post-Brexit commercial movements of goods can be facilitated to ensure business continuity.

In its submission to the EU, the UK Government is seeking a flexible and imaginative approach from the EU that goes beyond current EU frameworks for the Irish border. The UK would like to explore core principles with the EU for ‘seamless and frictionless’ Irish customs border management, against which any future proposals can be tested in the future. The UK paper has nine key principles and criteria, seven of which directly affect goods movements across the border. These include:

  • Avoiding having a physical border.
  • The desire to protect everyday movements of individuals, small traders’ and farmers’ movements of goods and the agri-food industry.
  • A ‘frictionless border’, with no security and safety declarations, no food standards checks or intellectual property checks at the physical border between NI and RoI.
  • Facilitating the transit of goods across the UK from Ireland to and onwards to mainland Europe - using community transit principles.
  • Protecting the integrity of the EU Customs Union, Single Market and new independent UK Customs regime by finding flexible and imaginative solutions that go beyond previous precedents.
  • Recognising the importance of trade between Ireland and the UK, with the aim of avoiding economic harm to Ireland.
  • Agreeing a time-limited interim period for new arrangements.

The EU response to the UK papers has been, at best, lukewarm, but the proposals nevertheless represent an imaginative first step towards meeting the EU demand of ‘avoiding a hard border between Ireland and Northern Ireland’ and the UK objective of achieving the same outcome. That’s been echoed by Ireland’s Taoiseach Leo Varadkar who has publicly said that “unique solutions” will be needed to prevent a hard border doing major damage to trade and commerce on both parts of the island.

However, the EU language is interesting. Arguing that the UK proposals for “creativity and flexibility,” can't be at the expense of the integrity of the single market and customs union, the EU language nonetheless echoes that of the Taoiseach’s, in seeking a "unique" solution to ensure that, “Irish citizens in Northern Ireland… continue to enjoy their rights as EU citizens.” Consequently, if citizens of NI (who are entitled to hold dual UK and Irish nationality) are to continue to be treated as “EU citizens,” post Brexit, any solution will indeed be unique and possibly different to that impacting citizens from the rest of the UK.

Reflecting on the language and principles above, it may be possible to create a two tier system: an exemption for smaller traders from having to submit any customs declarations and for ‘larger traders’ (a definition of ‘larger’ to be agreed), under a trusted trader programme (Authorised Economic Operator regime) who could submit reduced data sets for customs declarations, reporting and paying the customs duty on a more periodic basis.

Alternatively, if a new customs partnership could be reached with the EU, then no customs processes would be required and goods could move across the border freely as they do now.

These new models would require a robust enforcement mechanism which would include advanced tracking mechanisms and repayment processes which will inevitably result in additional costs for business and governments alike. Could it be that NI businesses would ultimately be managing two systems, one for island of Ireland sales and another for the rest of the EU?

Consequently, our advice to business remains:

  • Understand the potential impact of Brexit on your cross-border trade.
  • Explore AEO accreditation.
  • Evaluate your customs data and systems.
  • Actively support the business bodies in their discussions with the UK and Irish Governments on the potential options described so far.

The strong desire of the UK Government not to return to a hard goods border and, as far as possible, to maintain the status quo for goods moving between Ireland and the UK will be widely welcomed.

Contact us

Alan Martin
Indirect Tax Lead | NI
Tel: +44 (0)28 9041 5490
Email

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